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What does outbound logistics mean?

What does outbound logistics mean

Outbound logistics is the backbone of every successful business in 2024. It’s the crucial link between your products and your customers’ hands.

Get it right, and you’ll boost customer satisfaction, slash operational costs, and scale your business to new heights. But get it wrong, and you’ll be drowning in a sea of unhappy customers, mounting expenses, and stagnant growth.

In this blog post, we’ll reveal 10 powerful outbound logistics strategies that every business owner must master to thrive in the competitive landscape of 2024. From streamlining your warehouse operations to leveraging cutting-edge technology, we’ve got you covered.

So, whether you’re a small startup or a large enterprise, buckle up and get ready to revolutionize your outbound logistics game. Your business’s success depends on it.

Outbound Logistics Definition: What Every Business Owner Must Know

  • Outbound logistics is the process of delivering finished products to customers efficiently

  • It involves transportation, warehousing, order fulfillment, and inventory management

  • Optimizing outbound logistics can reduce costs, improve customer satisfaction, and boost profitability

Outbound logistics refers to the process of moving finished products from a company’s warehouse or production facility to the end customer. It is a crucial component of the supply chain that directly impacts customer satisfaction, loyalty, and ultimately, the business’s bottom line.

Key components of outbound logistics

Outbound logistics encompasses several key areas that business owners must understand and manage effectively:

Transportation management

Transportation is the backbone of inbound and outbound logistics. It involves selecting the most appropriate shipping methods (e.g., road, rail, air, or sea) based on factors such as cost, speed, and product characteristics. Effective transportation management requires:

  • Negotiating competitive rates with carriers

  • Optimizing routes to minimize transit times and costs

  • Ensuring compliance with regulations and documentation requirements

  • Tracking shipments in real-time to proactively address issues

Warehouse management

Efficient warehouse management is essential for streamlining outbound logistics. Key aspects include:

  • Designing the warehouse layout to optimize space utilization and minimize picking times

  • Implementing inventory management systems to ensure accurate stock levels and avoid overselling

  • Adopting technologies such as barcode scanning and RFID to improve accuracy and efficiency

  • Establishing clear processes for receiving, away, picking, packing, and shipping

According to a study by the Aberdeen Group, companies with best-in-class warehouse management practices achieve 99.7% inventory accuracy and 99.8% on-time shipments, compared to 97.3% and 97.8% for average performers, respectively.

Order fulfillment

Order fulfillment is the process of receiving, processing, and shipping customer orders. Efficient order fulfillment requires:

  • Integrating sales channels (e.g., e-commerce, brick-and-mortar, and marketplaces) to centralize order management

  • Automating order processing to reduce manual errors and improve speed

  • Implementing pick, pack, and ship strategies to optimize labor and resources

  • Providing real-time order tracking and communication to keep customers informed

A survey by Convey found that 84% of consumers are unlikely to shop with a brand again after a poor last-mile delivery experience, highlighting the importance of seamless order fulfillment.

Inventory control

Effective inventory control is crucial for minimizing carrying costs, avoiding stockouts, and ensuring timely order fulfillment. Key strategies include:

  • Implementing demand forecasting to predict future sales and optimize stock levels

  • Establishing reorder points and safety stock levels to avoid stockouts

  • Conducting regular inventory audits to identify discrepancies and maintain accuracy

  • Adopting inventory optimization techniques such as ABC analysis and just-in-time (JIT) inventory management

A study by the IHL Group found that retailers lose $1.75 trillion annually due to overstocks, out-of-stocks, and returns, emphasizing the need for robust inventory control practices.

The role of outbound logistics in the supply chain

Outbound logistics plays a vital role in the supply chain by:

  • Connecting production to end customers: Outbound logistics bridges the gap between a company’s production or warehousing facilities and the end customer, ensuring that products reach their destination in a timely and cost-effective manner.

  • Ensuring timely delivery of products: By optimizing transportation, warehousing, and order fulfillment processes, outbound logistics helps businesses meet customer expectations for fast and reliable delivery, which is increasingly important in the age of e-commerce and same-day delivery.

  • Impacting customer satisfaction and loyalty: Efficient outbound logistics directly influence customer satisfaction by ensuring that products arrive in good condition, on time, and with accurate documentation. Positive delivery experiences can foster customer loyalty and repeat business, while poor experiences can lead to lost sales and negative reviews.

In summary, outbound logistics is a critical component of the supply chain that involves managing the flow of finished products from a company’s facilities to the end customer. By optimizing transportation, warehousing, order fulfillment centers, and inventory control processes, businesses can reduce costs, improve customer satisfaction, and gain a competitive edge in their market.

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Mastering the Outbound Logistics Process for Optimal Efficiency

  • Streamline your outbound logistics process for maximum efficiency

  • Ensure accurate order processing, secure packaging, and timely delivery

  • Optimize transportation methods and track shipments for customer satisfaction

Outbound logistics is a critical component of supply chain management that involves the movement of finished products from a company to its customers. By mastering the outbound logistics process, businesses can improve efficiency, reduce costs, and enhance customer satisfaction. Let’s explore the key steps in the outbound logistics process and how to optimize them for optimal performance.

Step 1: Order processing and picking

The first step in the outbound logistics is order processing and picking. This involves receiving and validating customer orders, ensuring that the correct products are selected, and preparing them for packaging and shipping.

Receiving and validating customer orders in Outbound Logistics Processes

When a customer places an order, it’s essential to verify the accuracy of the order details, such as the product SKUs, quantities, and shipping address. Implementing an order management system can help automate this process, reducing the risk of errors and improving efficiency.

Selecting and retrieving products from inventory

Once the order is validated, the next step is to select and retrieve the products from the inventory. This process can be optimized by implementing a warehouse management system (WMS) that guides pickers to the correct locations and ensures that the right products are selected. Utilizing barcode scanning technology can further improve accuracy and speed up the picking process.

Step 2: Packaging and labeling

After the products are picked, they need to be properly packaged and labeled to ensure safe and efficient transportation to the customer.

Ensuring products are securely packaged

Proper packaging is crucial to protect products from damage during transit. The packaging materials and methods should be chosen based on the product characteristics, such as size, weight, and fragility. Implementing standardized packaging procedures and training employees on proper techniques can help ensure consistency and minimize packaging errors.

Applying accurate shipping labels and documentation

Accurate shipping labels and documentation are essential for ensuring that products reach their intended destination on time. This includes applying the correct shipping address, barcode labels, and any necessary customs documentation for international shipments. Utilizing an integrated labeling system that pulls data from the order management system can help reduce errors and streamline the labeling process.

Step 3: Transportation and delivery

The final step in the outbound logistics process is transportation and delivery, which involves selecting the appropriate shipping methods, coordinating with carriers, and tracking shipments to ensure timely delivery to customers.

Selecting appropriate shipping methods

Choosing the right shipping method depends on factors such as product characteristics, delivery timeframe, and cost. Options may include parcel carriers, less-than-truckload (LTL) shipping, or full truckload (FTL) shipping. Analyzing shipping data and negotiating rates with carriers can help optimize transportation costs while meeting customer expectations.

Coordinating with carriers for timely delivery

Effective coordination with carriers and distribution centers is crucial for ensuring timely delivery to customers. This involves providing accurate shipment information, scheduling pickups, and communicating any special handling requirements. Establishing strong relationships with reliable carriers and implementing a transportation management system (TMS) can help streamline the coordination process.

Tracking shipments and providing updates to customers

Customers expect visibility into the status of their orders, making shipment tracking an essential part of the outbound logistics process. Implementing a real-time tracking system that integrates with carrier data can provide customers with up-to-date information on their shipments. Proactively communicating any delays or issues can help manage customer expectations and improve satisfaction.

By mastering these key steps in the entire outbound logistics process, businesses can optimize efficiency, reduce costs, and enhance customer service. Implementing technology solutions, such as order management systems, warehouse management systems, and transportation management systems, can further streamline operations and improve visibility throughout the outbound logistics process.

Outbound Logistics Best Practices to Streamline Your Operations

  • Boost efficiency and cut costs with strategic warehouse layout and automation

  • Foster strong carrier relationships for seamless product delivery

  • Implement performance metrics to identify areas for continuous improvement

Implement an efficient warehouse layout

Optimizing your warehouse layout is crucial for streamlining outbound logistics operations. By carefully analyzing product flow and storage requirements, you can create a layout that minimizes travel time and maximizes space utilization. Consider implementing a zone-picking system, where similar products are grouped, reducing the time pickers spend navigating the warehouse.

Leverage technology to enhance the accuracy and speed of your picking process. Equip your team with mobile devices and barcode scanners to ensure they can quickly locate and pick the right products. Implement a put-to-light or pick-to-light system, which uses LED displays to guide pickers to the correct locations, reducing errors and increasing efficiency.

Leverage automation and technology

Investing in automation and technology is essential for streamlining outbound logistics operations. Adopt a robust warehouse management system (WMS) to gain real-time visibility into inventory levels, order status, and employee productivity. A WMS can also optimize picking routes, reducing travel time and increasing throughput.

Utilize barcode scanning and radio-frequency identification (RFID) technology for accurate and efficient inventory tracking. These tools ensure that the right products are picked, packed, and shipped, minimizing errors and returns. Automated conveyor systems and sortation equipment can further enhance the speed and accuracy of order fulfillment.

Establish strong partnerships with carriers

Building strong relationships with your carriers is critical for ensuring reliable and cost-effective product delivery. Take the time to negotiate favorable rates and service levels, leveraging your shipping volume to secure the best terms. Regularly assess carrier performance, tracking metrics such as on-time delivery, damage rates, and customer satisfaction.

Consider implementing a transportation management system (TMS) to optimize carrier selection and routing. A TMS can help you identify the most cost-effective and efficient shipping methods based on factors such as delivery time, package size, and final destination. By collaborating closely with your carriers and utilizing technology, you can ensure that your products reach customers on time and in perfect condition.

Implement performance metrics and continuous improvement

To truly streamline your outbound logistics operations, it’s essential to establish key performance indicators (KPIs) and continuously monitor progress. Track metrics such as order cycle time, order accuracy, on-time shipping, and cost savings per order to identify areas for improvement.

Regularly review your processes and seek feedback from your team to uncover bottlenecks and inefficiencies. Encourage a culture of continuous improvement, empowering employees to suggest and implement changes that enhance productivity and customer satisfaction.

Optimize packaging and materials handling in Inbound and Outbound Logistics

Efficient packaging and materials handling play a significant role in streamlining both outbound and inbound logistics. Evaluate your packaging design to ensure that it adequately protects your products while minimizing material waste and shipping costs. Consider using sustainable packaging materials to reduce environmental impact and appeal to eco-conscious customers.

Implement an effective materials handling system to minimize product damage and optimize storage space. Utilize ergonomic equipment, such as adjustable workstations and lift-assist devices, to reduce physical strain on your employees and improve productivity.

By optimizing your packaging and materials handling processes, you can reduce costs, and improve product protection. On the other hand, you can enhance the overall efficiency of your outbound logistics and transportation operations.

The Importance of Outbound Logistics in Driving Business Success

  • Outbound logistics plays a crucial role in customer satisfaction and loyalty

  • Efficient outbound logistics reduces costs and improves profitability

  • Scalable outbound logistics processes enable sustainable business growth

Outbound logistics is a critical component of supply chain management that directly impacts a company’s success. It involves the processes and activities required to deliver finished products to customers, including order fulfillment, transportation, and inventory management. Businesses can enhance customer satisfaction, reduce operational costs, and enable scalability for future growth by using inbound logistics processes and optimizing outbound logistics.

Enhancing customer satisfaction

Customer satisfaction is a key driver of business success, and outbound logistics plays a significant role in ensuring that customers receive their orders accurately and on time. By focusing on efficient order fulfillment and providing real-time order tracking, companies can improve the customer experience and build long-term loyalty.

Ensuring accurate and timely order fulfillment

Accurate order fulfillment is essential for maintaining customer trust and reducing the costs associated with returns and replacements. To achieve this, businesses must implement robust inventory management systems that provide real-time visibility into stock levels and locations. This allows for faster order processing and reduces the likelihood of stockouts or overselling.

According to a 2021 survey by Convey, 84% of consumers say that the delivery experience is an important factor in their decision to shop with a brand again. By streamlining picking, packing, and shipping processes, companies can reduce lead times and improve on-time delivery rates.

Providing real-time order tracking and updates

In today’s digital age, customers expect transparency and real-time updates on their orders. By providing order tracking capabilities, businesses can keep customers informed about the status of their shipments and reduce the number of inquiries received by customer support teams.

Real-time order tracking can be achieved through the integration of transportation management systems (TMS) with carrier APIs, allowing for automatic updates on shipment progress. Additionally, businesses can proactively communicate with customers through email, SMS, or mobile app notifications to provide updates on order status, estimated delivery dates, and any potential delays.

Reducing operational costs

Efficient outbound logistics can significantly reduce operational costs, improving a company’s bottom line. Businesses can streamline their operations and allocate resources more effectively by using outbound logistics, which focuses on optimizing transportation routes and modes and minimizing inventory holding costs.

Optimizing transportation routes and modes

Transportation costs are a significant portion of outbound logistics expenses. By optimizing routes and selecting the most cost-effective transportation modes, businesses can reduce these costs while still meeting customer expectations.

This can be achieved through the use of transportation management systems (TMS) that leverage algorithms to determine the most efficient routes based on factors such as distance, traffic, and weather conditions. Additionally, businesses can explore alternative transportation modes, such as intermodal shipping, which combines multiple modes (e.g., truck and rail) to reduce costs and improve efficiency.

Minimizing inventory holding costs through efficient management

Inventory holding costs, including storage, insurance, and obsolescence, can tie up significant capital and impact a company’s profitability. By implementing efficient inventory management practices, businesses can minimize these costs while ensuring adequate stock levels to meet customer demand.

Strategies for reducing inventory holding costs include:

  • Implementing just-in-time (JIT) inventory management to align stock levels with customer demand

  • Utilizing inventory optimization software to determine optimal stock levels and reorder points

  • Regularly reviewing and adjusting inventory policies based on sales data and market trends

Enabling scalability and growth

As businesses grow, their outbound logistics processes must be able to scale accordingly to accommodate increased order volumes and changing customer expectations. By establishing robust processes and adapting to market demands, companies can position themselves for sustainable growth.

Establishing robust processes to handle increased order volumes

To enable scalability, businesses must design outbound logistics processes that can handle increased order volumes without sacrificing efficiency or accuracy. This involves investing in technology solutions that automate key tasks, such as order processing, picking, and packing, and allow for easy integration with other systems as the business grows.

Additionally, businesses should document and standardize their outbound logistics processes to ensure consistency and facilitate training for new employees. By creating a strong foundation, companies can more easily scale their operations as order volumes increase.

Adapting to changing market demands and customer expectations

As markets evolve and customer expectations change, businesses must be able to adapt their own outbound logistics processes and strategies to remain competitive. This requires a deep understanding of customer needs and preferences, as well as the flexibility to modify processes and offerings as needed.

To stay ahead of changing market demands, businesses should:

  • Regularly gather and analyze customer feedback to identify areas for improvement

  • Monitor industry trends and competitor actions to identify opportunities for differentiation

  • Foster a culture of continuous improvement and innovation within the organization

By remaining agile and responsive to market changes, businesses can position themselves for long-term success and growth.

Common Challenges and Solutions in Outbound Logistics

  • Outbound logistics faces challenges like peak season demand, transportation disruptions, and inventory accuracy

  • Effective strategies can help businesses overcome these hurdles and maintain smooth operations

  • Investing in the right technology and processes is crucial for long-term success in outbound logistics

Managing peak season demand

One of the most significant challenges in outbound logistics is handling the sudden surge in demand during peak seasons, such as holidays or special events. Businesses often struggle to keep up with the increased volume of orders, leading to delays, stockouts, and customer dissatisfaction.

To tackle this issue, companies must focus on accurate forecasting and planning. By analyzing historical sales data and market trends, businesses can anticipate the expected demand during peak seasons and adjust their inventory levels accordingly. This process involves collaborating closely with suppliers to ensure timely delivery of raw materials and finished goods.

Another strategy is to expand the temporary workforce and resources during peak periods. This may include hiring additional staff for warehousing, packaging, and shipping operations, as well as renting extra storage space or vehicles. By scaling up capacity temporarily, businesses can handle the increased workload without compromising on quality or efficiency.

Dealing with transportation disruptions

Transportation is a critical component of the outbound logistics system, and any disruptions in this area can have a ripple effect on the entire supply chain. Common issues include weather-related delays, traffic congestion, accidents, and carrier capacity constraints.

To mitigate these risks, businesses must develop robust contingency plans. This involves identifying potential disruption scenarios and creating alternative routes or modes of transportation. For example, if a shipment is delayed due to a snowstorm, the company can quickly switch to air freight instead of relying on ground transport.

Another best practice is to diversify the carrier base and utilize multiple modes of transportation. By not putting all eggs in one basket, businesses can reduce their dependency on any single carrier or route. This approach also provides flexibility in case of unexpected disruptions, allowing the company to quickly shift to a different carrier or mode without significant downtime.

Ensuring inventory accuracy

Accurate inventory management is the foundation of efficient outbound logistics. If the inventory records do not match the actual stock levels, it can lead to a host of problems, such as overstocking, stockouts, and incorrect order fulfillment.

To maintain inventory accuracy, businesses must implement regular cycle counts and audits. This involves physically verifying the stock levels and comparing them against the records in the inventory management system. By conducting these checks periodically, companies can identify discrepancies early on and take corrective actions.

Another solution is to invest in real-time inventory tracking systems. These technologies, such as RFID (Radio-Frequency Identification) and barcoding, enable businesses to monitor stock movements in real-time, from the moment goods enter the warehouse until they are shipped out. By providing visibility and traceability, these systems help reduce errors, improve accuracy, and streamline the outbound logistics process.

Optimizing warehouse operations

Inefficient warehouse operations can be a major bottleneck in outbound logistics. Common issues include poor layout, inadequate storage systems, and manual processes that lead to errors and delays.

To optimize warehouse performance, businesses should focus on designing a logical and efficient layout. This involves organizing the space based on product categories, demand patterns, and shipping requirements. For example, fast-moving items should be placed closer to the packaging and shipping areas to minimize travel time and improve throughput.

Another best practice is to implement automated storage and retrieval systems (AS/RS). These technologies, such as conveyor belts, sorting machines, and robotic picking systems, can significantly reduce manual labor and improve accuracy. By automating repetitive tasks, businesses can free up their workforce to focus on higher-value activities, such as quality control and customer service.

Managing reverse logistics For Outbound and Inbound Logistics

Reverse logistics, which involves the flow of goods from customers back to the business, is often overlooked but can have a significant impact on outbound logistics. Common reasons for returns include product defects, incorrect orders, or customer dissatisfaction.

To manage reverse logistics effectively, businesses must establish clear return policies and procedures. This includes providing customers with instructions on how to initiate a return, setting up a dedicated returns processing and distribution center, and training staff to handle returned goods efficiently.

Another strategy is to implement a robust quality control process to minimize the likelihood of defective products reaching customers in the first place. This involves conducting thorough inspections at various stages of the supply chain, from raw material procurement to final product assembly.

By proactively managing reverse logistics, businesses can reduce costs, improve customer satisfaction, keep inventory turnover, and minimize the impact on outbound logistics operations.

The disadvantages of outbound logistics

While outbound logistics is essential for business success, it also comes with certain disadvantages. One of the main drawbacks is the high cost associated with transportation, warehousing, and inventory management. These expenses can eat into profit margins, especially for small and medium-sized enterprises.

Another disadvantage is the complexity of managing multiple carriers, routes, and modes of transportation. This requires significant coordination and communication, which can be time-consuming and prone to errors.

Despite these challenges, the benefits of effective outbound logistics far outweigh the drawbacks. By implementing the strategies discussed in this section, businesses can overcome common hurdles and create a competitive advantage in their industry.

Further reading and resources

To dive deeper into the world of outbound logistics, consider exploring the following books and resources:

  1. “Supply Chain Logistics Management” by Donald J. Bowersox, David J. Closs, and M. Bixby Cooper – This comprehensive textbook covers various aspects of logistics management, including transportation, warehousing, and inventory control.

  2. “Lean Supply Chain and Logistics Management” by Paul Myerson – This book focuses on applying lean principles to optimize supply chain operations, including outbound logistics.

  3. Council of Supply Chain Management Professionals (CSCMP) – This global organization provides resources, education, and networking opportunities for supply chain professionals, including those involved in outbound logistics.

  4. Logistics Management Institute (LMI) – This non-profit organization conducts research and provides consulting services related to logistics and supply chain management, offering valuable insights into outbound logistics best practices.

By continuously learning and staying up-to-date with the latest trends and techniques in the outbound logistics services themselves, businesses can position themselves for long-term success in today’s competitive marketplace.

Measuring and Optimizing Outbound Logistics Performance

  • Track essential KPIs to identify areas for improvement

  • Implement continuous improvement strategies to enhance outbound logistics processes

  • Leverage technology and automation to streamline operations and reduce costs

Measuring and optimizing outbound logistics performance is crucial for ensuring customer satisfaction, reducing costs, and maintaining a competitive edge. By tracking key performance indicators (KPIs) and implementing continuous improvement strategies, businesses can identify areas for enhancement and take action to streamline their outbound logistics processes.

Key performance indicators (KPIs) to track

To effectively measure and optimize outbound logistics performance, businesses must track several critical KPIs. These indicators provide valuable insights into the efficiency and effectiveness of outbound logistics operations, helping to identify areas for improvement.

On-time delivery rate

The on-time delivery rate measures the percentage of orders that are delivered to customers within the promised timeframe. This KPI is essential for assessing the reliability and efficiency of outbound logistics processes. To calculate the on-time delivery rate, divide the number of orders delivered on time by the total number of orders shipped, and multiply by 100.

Order accuracy and completeness

Order accuracy and completeness refer to the percentage of orders that are fulfilled correctly, with all items included and in the correct quantities. This KPI is crucial for ensuring customer satisfaction and reducing the costs associated with returns and replacements. To calculate order accuracy and completeness, divide the number of accurately fulfilled orders by the total number of orders shipped, and multiply by 100.

Transportation costs per order

Transportation costs per order measure the average cost of shipping each order to customers. This KPI helps businesses assess the efficiency of their transportation network and identify opportunities for cost reduction. To calculate transportation costs per order, divide the total transportation costs by the number of orders shipped.

Continuous improvement strategies

Implementing continuous improvement strategies is essential for optimizing outbound logistics performance over time. By regularly reviewing and analyzing KPIs, conducting root cause analysis for issues, and encouraging employee feedback, businesses can identify opportunities for process enhancements and take action to improve efficiency and reduce costs.

Regularly reviewing and analyzing KPIs

Regularly reviewing and analyzing KPIs is crucial for identifying trends, patterns, and areas for improvement in inbound logistics and outbound logistics processes. By setting up a consistent review schedule, businesses can stay on top of performance metrics and make data-driven decisions to optimize operations.

Conducting root cause analysis for issues and implementing corrective actions

When issues arise in outbound logistics processes, it’s essential to conduct a thorough root cause analysis to identify the underlying factors contributing to the problem. By understanding the root causes of issues, businesses can implement targeted corrective actions to prevent recurrences and improve overall performance.

Encouraging employee feedback and suggestions for process enhancements

Frontline employees often have valuable insights into the day-to-day challenges of outbound logistics and opportunities for improvement in outbound logistics processes. By encouraging employee feedback and suggestions, businesses can tap into this knowledge and identify practical solutions for enhancing efficiency and effectiveness.

By tracking essential KPIs and implementing continuous improvement strategies, businesses can effectively measure and optimize their outbound logistics performance, leading to increased customer satisfaction, reduced costs, and a stronger competitive position in the market.

Elevating Your Business with Outbound Logistics

Outbound logistics is a critical component of supply chain management that directly impacts customer satisfaction, operational efficiency, and business growth. By implementing the strategies and best practices discussed in this article, you can streamline your outbound logistics processes and gain a competitive edge in today’s market.

Investing in the right technology, establishing strong partnerships with carriers, and continuously monitoring and optimizing your performance is key to success. By prioritizing outbound logistics, you can reduce costs, improve delivery times, and enhance the overall customer experience.

What steps will you take to elevate your outbound logistics strategy in 2024? Consider conducting a thorough assessment of your current processes and identifying areas for improvement. Start by implementing one or two of the best practices mentioned and gradually build upon your success.

Remember, the world of outbound logistics is constantly evolving, so stay informed about the latest trends and technologies. By staying proactive and adaptable, you can position your business for long-term success in the years to come.

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